China a buyer amid 'colossal imbalances' in central bank gold hoards

Central banks bought close to 535 tonnes of gold in 2012, the most since 1964.

Amid a 28% fall in the gold price last year, gold purchases by central banks slowed to 409 tonnes, but may top 500 tonnes again this year.

The world's central banks changed from being net sellers of the metal in 2009 after two decades of decreasing holdings.

Gold movements in the official sector are closely watched by the market.

None more so than the People's Bank of China.

China's gold reserves are officially put at 1,054 tonnes – a number officials haven't updated since April 2009.

Rumours about massive purchases – up to 6,000 tonnes according to some estimates or a more modest 300 tonnes over the first six months of 2013 – continue to circulate as the country seeks to diversify its massive foreign exchange reserves which are mostly held in US dollars.

Gold makes up little more than 1% of the country's $4 trillion in forex reserves.

That compares to more than 70% for the United States which holds 8,166 tonnes of gold in vaults.

Germany keeps 3,384 tonnes and Italy has 2,452 tonnes, while Russia, which recently overtook the official Chinese hoard, keeps 1,105 tonnes, or 9.8% of its total holdings in gold, according to data from the World Gold Council.

Bloomberg quotes David Marsh, managing director at the Official Monetary and Financial Institutions Forum, a research company, as saying "over the past six or seven years the Chinese authorities probably have been adding to their holdings in different ways":

“It is clear that western central banks over time will be reducing their reserves and China and other Asian countries will be increasing.

"Gold will become more traded amongst central banks in the next 30 years because there are colossal imbalances in world gold holdings as a percentage of overall asset reserves."

On the Comex division of the New York Mercantile Exchange in after-hours trade on Tuesday gold for December delivery enjoyed another day of gains, albeit tiny, trading at $1,235 an ounce.

After a dismal 2013, gold attempted a comeback this year hitting a high of $1,380 in March, but gold's retreat since then only accelerated during the third quarter with a loss of 4.5% so far in September alone. Gains since the start of the year are now just 2.5%.